Market Update Posted on March 24, 2020
Sharemarkets continue to fall on the back of growing concerns about the spread of the coronavirus. At times of heightened market volatility, it’s easy to fear how your superannuation and other investments might be affected, but it’s important to understand the nature of market movements before making any sudden decisions.
Falls are normal, even without fear of coronavirus
We’ve seen share market corrections occur frequently, sometimes as high as 15%. Last year, we saw a 7% fall in August alone in Australia. What’s compounding the issue at the moment is the emotional aspect, as people are concerned about the broader health implications, particularly for the elderly or those susceptible to respiratory conditions.
Over time though, we’ve seen that markets are resilient against global epidemics. Even if the immediate impacts cause a temporary fall, the long-term trend is positive:
Source: Morningstar Global Markets GR USD Index, using Morningstar Direct data as at 31 December 2019
The chart below also shows how markets can rebound following some of the major epidemics in recent history:
Source: Morningstar – Coronavirus: An investment perspective
We understand that investors become anxious when superannuation and shares are so heavily impacted in a short space of time. It’s important to remember that these are long term investments which can fluctuate but historically produce strong returns. Even after significant events such as the GFC, there is evidence the long-term trends are positive for investors who stayed the course and took advantage of the potential market upswing:
Source: Morningstar: How to become an emotionally intelligent investor
At the moment, any falls you may have seen are technically only a ‘loss on paper’. However, when the market recovers there’s a chance your investments could return to their pre-fall state. Selling at the ‘bottom of the market’ only serves to crystallise these losses, making them real and irreversible.
If you are concerned about cashflow, please contact us. We will work with you to support you through this time.
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